Welsh secretary David Jones is calling for clarity from Labour on income tax referendum

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WELSH Secretary David Jones has accused Labour MPs in Westminster of over-ruling the party in the Assembly on the devolution of income tax and breaking cross-party consensus on new fiscal powers for Wales.

The Conservative Clwyd West MP’s comments came a day after Shadow Welsh Secretary Owen Smith denounced the proposals for the devolution of income tax, subject to a referendum, as a Tory “trap”.

The cross-party Silk Commission recommended that the Assembly gain the ability to vary individual income tax rates. When the UK Government published its draft Wales Bill, under which the Assembly would only be able to raise or lower tax rates in unison, Welsh Government Finance Minister Jane Hutt said she believed the more flexible model recommended by the commission should have been adopted.

During Wednesday’s meeting of the Welsh Grand Committee, Mr Smith warned against changes that “risk creating destructive tax competition between the nations and regions of the UK and, thereby, fundamentally undermining the union that binds and strengthens us.” He said Labour had not sought to devolve income tax-varying powers to Wales and that this “trap” could be used by a Conservative administration to force a Welsh Government to raise taxes to pay for “higher-value services”.

Mr Jones told the Western Mail: “We’ve now got a complete break in the consensus, pursuant to which we thought we were going to go ahead with the Wales Bill. Certainly, we now need clarity from the Labour party as to where they stand.

“I think it’s very clear that the Labour party in Westminster has over-ruled the Labour party in Cardiff in the Assembly because Jane Hutt has always been very enthusiastic about fiscal devolution... And really, so far as income tax was concerned, her only quibble was whether it should be a lockstep or variable individual bands.”

Claiming that Labour in Westminster had displayed a “fundamental hostility to fiscal devolution,” he said: “The Labour party in Westminster have slapped down the first minister and his cabinet in Cardiff. There is an utter lack of clarity as to the Labour party’s position and I think everybody wants to know where they stand.”

Confident that the Bill can get through parliament, he said: “We can certainly deliver the Bill. There is no doubt about that – and in fact the prime minister was very clear yesterday that we intend to press on with that legislation.

“But the Bill only delivers the competence to hold a referendum. The referendum can only be delivered on a two-thirds majority vote in the Assembly.

“If the Welsh Government never puts it to the vote in an Assembly then it will sit on a shelf gathering dust for evermore and we are very, very concerned to hear that this is what they apparently propose to do.”

Describing why he wanted the powers devolved, he said: “We’re very anxious to see accountability for the Welsh Government and that is significantly achieved by devolution of income tax. We’re also anxious that the Welsh Government should have incentives to grow the Welsh economy; that is also achieved by devolution of income tax.

“And most importantly, I think from the Labour party’s perspective, they have always viewed the devolution of income tax as a way of getting an increased income stream against which they could borrow for capital expenditure. They now appear to abandoning that ambition.”

Addressing Mr Smith’s claims that the policy was a “trap,” he said: “They also appear to be under the delusion that devolution of income tax would require them to vary the rate of tax levied in Wales; that’s not the case. They needn’t do it. They could reside with the same rate of tax that is applicable to the UK as a whole.”

A Welsh Labour spokesman highlighted differences of opinions within Conservative ranks, pointing to Tory Assembly leader Andrew RT Davies's support for the more flexible income tax-varying powers recommended by the Silk Commission; last week Mr Jones described Mr Davies' position as a “personal” view.

The spokesman said: “Last week David Jones and [Tory Assembly leader] Andrew RT Davies engaged in out-and-out public war over how much to cut tax for the richest. Next we had the leader of the Welsh Conservatives describe himself as 19-stone of Welsh beef, effectively offering the Secretary of State outside for a fight.

“You couldn’t make it up. And now this, a blatant attempt to try and paper over the ever widening cracks inside the Tories.

“If the Tories really wanted to cut income tax and cut stamp duty, they could do that today. No-one seems to have told David Jones he’s in Government.

“We know these proposals would cost Wales about £225m – so would David Jones or Andrew RT Davies like to tell us what is getting cut? Welsh Labour is consistent in saying that devolving income tax is not a priority for us at this time, there are too many obstacles in the way – notably a reluctance to address the fair funding issue.

“Even if those issues are resolved, and income tax devolution became a live issue, the lockstep model being offered by the Tories is effectively useless. We have always said that we would need to be absolutely sure that Wales would be better off before recommending income tax powers to the Welsh people.”